Samizdata quote of the day

The paper money of the Soviet Republic supported the Soviet Government in its most difficult moments, when there was no possibility of paying for the civil war out of direct tax receipts. Glory to the printing press! To be sure, its days are numbered now but it has accomplished three-quarters of the task. In the archives of the great proletarian revolution, alongside the modern guns, rifles, and machine guns which mowed down the enemies of the proletariat, an honorary place will be occupied by that machine gun of the People’s Commissariat of Finance which attacked the bourgeois regime in its rear – its monetary system – by converting the bourgeois economic law of money circulation into a means of destruction of that same regime and into a source of financing the revolution.

– Bolshevik economist Evgeny A. Preobrazhensky, in his booklet entitled Paper Money during the Proletarian Dictatorship, published in 1920.

The paper money only worked because people were forced to accept it – by the Social Justice of the Red Terror.

Ordinary commercial enterprises can not use the methods of the Red Army and the organs of state security.

For example the banking system can (and does) expand lending beyond real savings – expand “broad money” (indeed before 1844 banks could just their own bank notes – not that banning this had any fundamental practical effect, banks just found other ways of expanding “broad money”). However……

Ordinary commercial banks can not do what Lenin and co did – because people can always say “no” to their bank notes (or their other debt instruments), unless the government backs them up.

Without government intervention commercial banks (via their complex interactions)can expand “broad money” and create a “boom” – but their is an inevitably a “bust” (with the bank credit shrinking down towards the monetary base of REAL SAVINGS – i.e. the sacrifice of consumption) and the credit bubble banks (or some of them) going bankrupt (closing their doors – and reopening them).

Only government can prevent this (even a “private” Central Bank has to be government backed to be effective) – by increasing the monetary base (in the end with the printing press) and using this money to back up the existing (and future) credit expansion.

In was in a book, it may have been Holy Blood, Holy Grail, or one of its successors, of all places, where I found a good diatribe about how ideologies such as fascism, communism and certain other political ideologies, even democracy, sought to replace the religious institutions. The above text sounds like the standard tract of how certain activities, normally shunned or forbidden by the “religion”, are excusable if they are used to advance the cause.

As the ineffable Paul Krugman has pointed out, the reason the US Dollar works is because it is backed by men with guns. Of course, because he is a prize asshat, he thinks this is a good thing, but that’s another story. And they have the cheek to call gold a barbarous relic!

Yes, given the number of people executed by a bullet to the head in the USSR, the cranky old Nagant probably killed more people than any other pistol ever made. True gun control would keep handguns out of the clutches of the state.

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